The Current State of the ASC Industry
At the 20th Annual Ambulatory Surgery Centers Conference on Oct. 25, Scott Becker, JD, CPA, partner of McGuireWoods shared observations on the most important issues and opportunities in the current surgery center industry.
Though the healthcare environment is rapidly evolving and full of obstacles to overcome, ambulatory surgery centers are not without the ability to survive and even thrive. "There is a more positive outlook than the past few years. There are pockets of opportunity," said Mr. Becker.
Hospital employment of physicians has been a large threat to ASCs, but the trend is beginning to slow. Though specialties like cardiology show a 70 to 80 percent rate of physician alignment with hospitals, the ASC core specialties, such as ophthalmology, GI and orthopedics, are holding a steady level of independence. "Core specialties are the lifeblood of ASCs," said Mr. Becker. "The thrust of hospital employment could have been the death of many small centers." Yet this is beginning to change. Hospitals are beginning to face a growing number of financial challenges, including layoffs, which leads to a slowdown in physician employment.
Reimbursement remains an issue for ASC leaders to contend with. Both Medicare and commercial reimbursement rates are relatively flat. Out-of-network reimbursement remains a viable strategy, but it is uncertain if this will be sustainable in the long term. "Out-of-network reimbursement could be an alternative for progressive payers," said Mr. Becker.
January and February have typically been slow months for surgery centers, as patients consider their insurance plan deductibles. Now, as deductibles rise patients will become more cautious. This slow period may very well stretch beyond the first two months of the year. Yet, surgery centers are not entirely without the possibility of benefit. Patients are becoming savvy consumers, shopping for the best price. ASCs remain the standard for safe, low cost providers in healthcare. Great payer contracting is the best strategy for ASCs to cope with reimbursement issues.
Healthcare markets vary widely across the nation and each different market represents a different set of challenge and opportunities for ASCs. "Where you are is critical," said Mr. Becker. ASCs in small communities face a lack of independent physicians, will surgery centers in urban markets tend to have more access to a larger physician pool. Reimbursement, patient population and hospital competition all vary from location to location, as well.
Legal issues for ASCs remain critical, if murky, areas to address. Physician-owned distributorships, lithotripsy, anesthesia service and pathology remain top areas.
Hospitals, the giants of the healthcare market, are ASCs main source of competition. If one hospital begins to employ physicians, others in the same market will begin to do the same, often leaving ASCs struggling to find viable recruitment options. In response to hospital acquisition of physicians and physician groups, ASCs may begin to consider employ physicians. ASC chains in particular may find a physician employment model that is successful.
Many ASCs have found that rather than compete with hospitals, the logical choice is to form a joint venture. The ideal joint venture will allow ASCs to succeed in a market with the support and resources of the larger partner. "Hospitals may or may not help with managed care contracting. ASC leaders must do a ton of due diligence before entering a partnership," said Mr. Becker.
Strong leadership is one of the most important aspects of ASC success, when it comes to challenges and opportunities alike. Administrators are on the forefront of surgery center leadership, which requires playing a number of different roles. "ASC administrators must be both the COO and CDO," said Mr. Becker. Administrators are responsible for day-to-day operations and long term strategy for center growth.
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